Era Helicopters writes off $117M from EC225 fleet

In the recent Q3 earnings call with financial analysts, Era Helicopters President and CEO Chris Bradshaw provided the following commentary as part of his introduction:-

“The next topic is an update on the status of H225 and AS332 L2 model helicopters following the fatal accidents off the coast of Norway in April 2016, and resultant operational suspension of the helicopter models. The root cause of the accident remains under investigation by the AIBN. While Civil Aviation Authorities have issued directives that permit to return to service, subject to numerous requirements. The vast majority of the offshore oil and gas fleet of these helicopter models remains on operational suspension. Beyond regulatory approval and the completion of the accident investigation, a potential broad-based return to service of these helicopters, in the offshore oil and gas industry, will be dependent upon the development of a detailed safety case by operators as well as confidence amongst our oil and gas customers and the labor unions representing their employees.

During Q3, Era noted certain developments that led us to come to the belief that there will not be a broad-based return to service of these helicopter models in the offshore oil and gas industry. As such, we performed an impairment analysis to assess the value of these helicopters. It was determined that the book value of our H225 helicopters, capital parts and related inventory, exceeded the fair value and a noncash impairment charge of $117 million was recorded in Q3. The new book values represent an average of approximately $4 million per H225 helicopter in our fleet, which is consistent with the third-party values we received in a recent appraisal report conducted by one of the leading helicopter valuation firms.”

Bradshaw was also asked a question the future plan for Era’s nine EC225s, to which he responded

“We are actively marketing our H225s helicopters for either lease or sale. We do think, that a potential and perhaps likely market for them are certain utility applications that require heavy lift capacity. There’s a well-established market for those type of missions that’s currently being serviced by older generation of the aircraft and the 225s could be a good alternative for those missions. So we’re actively marketing the aircraft that we have in our fleet either to generate cash flow from leasing them or to generate cash from selling them. In terms of cost, we have put these aircraft and we did this last year. We placed them into long-term storage”.